Ireland: Budget 2017 Highlights

Introduction

The 2017 Budget in Ireland was announced on 11th October 2016 and introduces a number of changes which are relevant to international businesses operating in Ireland.

Here we highlight some of the headlines; however we would encourage you to seek advice relative to your specific circumstances.

USC Rates

The Budget has made favourable adjustments to the lower USC bands and rates, with rates reduced by 0.5% to 0.5%, 2.5% and 5%.

The 8% and 11% USC rates for higher income levels and income tax rates and bands remain unchanged.

Tax Credits

Home carer tax credit increased by €100 to €1,100; and earned income credit for self-employed increased by €400 to €950.

Global Mobility Incentives

The Special Assignee Relief Programme (SARP) and Foreign Earnings Deduction (FED) have been extended to 2020, with the minimum number of days required to be spent abroad reduced from 40 to 30 days.

Landlords

The budget has introduced an increase in interest deductibility for residential landlords from 75% to 80% in 2017.

The ‘rent-a-room’ income ceiling has been increased by €2,000 to €14,000 annually.

The ‘living city’ initiative has been extended to landlords and the requirements for residential applicants have been relaxed.

Agriculture & Food

Farmers facing an exceptionally poor year will be allowed to “step out” of the five year income averaging and pay on a current year basis.

This may be availed of for the 2016 tax year, but deferred tax liability will be payable over subsequent years.

Farm restructuring relief has been extended by three years to 2019.

A new low cost (below 3%) loan is to be introduced for farmers.

A new tax credit of €1,270 is being introduced for fishermen to assist the viability of the fishing sector. Available for fishermen who have fished for wild fish or wild shellfish for at least 80 days in a tax year.

Energy-Efficient Equipment

The accelerated 100% capital allowances scheme for energy efficient equipment is being made available to sole traders.

Deposit Interest Retention Tax (DIRT)

The 41% DIRT rate is being reduced to 39% for 2017 and will be reduced by 2% annually over three years to 33% by 2020.

Corporate Tax

The Minister of Finance, Michael Noonan, once again confirmed Ireland’s commitment to maintaining the 12.5% corporation tax rate.

The low corporation tax rate will continue to secure Ireland’s future as a leading destination for Foreign Direct Investment (FDI).

International Corporate Tax

Three publications have been released along with the Budget, which highlight the commitments to Ireland’s international tax strategy:

The Government has published a second ‘Update on Ireland’s International Tax Strategy’ in light of Brexit which reaffirms its commitment to the OECD BEPS project and the EU tax proposals;

‘Getting Ireland Brexit Ready’ has been published outlining the policy responses to Brexit to enable exposed sectors of Ireland’s economy to remain competitive, and to protect the public finances from Brexit related shocks; and

‘An Economic Evaluation of the R&D Tax Credit’ - this report highlights the beneficial impact the tax credit has had in encouraging innovation and investment in R&D in Ireland.

A review of the Irish corporate tax code was launched by the Minister, which will include consideration of how best to deliver tax certainty for business and maintain the competitiveness of Ireland’s corporation tax offering.

This independent review, to be carried out by Seamus Coffey of University College Cork, will include consideration of what further steps Ireland may need to take to ensure full compliance with the Organization for Economic Cooperation and Development (OECD) Base Erosion Profit Shifting (BEPS) recommendations.

Knowledge Development Box (KDB)

This relief was introduced with effect from 1 January 2016, and new legislation will shortly be brought forward by the Minister for Jobs, Enterprise and Innovation, Mary Mitchell O’Connor, to provide an additional benefit, within the parameters of the OECD ‘modified nexus approach’, for small companies that wish to avail of the KDB.

Section 110 Companies

Draft legislation was published on 6 September to counteract perceived abuses of the Section 110 regime for Irish property transactions.

The Minister indicated that after appropriate consultation, issues arising in relation to funds and Irish property would also be addressed in the Finance Bill.

Future Developments

A new small and medium enterprise-focused share-based incentive is to be introduced in Budget 2018.

The Irish Revenue is launching a consultation process to redesign and modernise the Pay As You Earn (PAYE) system, designed to help employees manage their tax affairs, reduce administrative costs and improve compliance.

Capital Taxes

Entrepreneur Relief from CGT - the 20% rate of CGT (general rate 33%) introduced in the Finance Act 2015 on disposals by entrepreneurs of certain business assets or shares has been reduced to 10%.

There has been no change to the €1m lifetime limit of qualifying capital gains, although the Minister has indicated he will review this limit in future budgets.

Capital Acquisitions Tax (CAT) – the Group A tax free threshold has been increased from €280,000 to €310,000. This threshold generally applies to gifts and inheritances from parents to their children.

The Group B and Group C have increased by circa 8% each to €32,500 and €16,250 respectively. No change to the rate of CAT, which is currently 33%.

What Next?

Before progressing overseas (whether in Ireland or elsewhere), speak to a global expansion advisor.
They can provide valuable insight to ensure you maximise opportunities to help you succeed and avoid any pitfalls along the way.